Full directors report - Mondi

esults for the year that were ahead
of expectations, with Group revenue
of E5,257 million and underlying
operating profit of E294 million.
Although down by 17% and 33%
respectively compared with the
previous year, these figures still
signify a very sound performance
given the difficult trading conditions.
The fourth quarter brought volume
improvements across all main paper
grades, price increases in most of
the key packaging grades, and a
stable pricing environment in the
European uncoated fine paper (UFP)
market. Results were also boosted
by a strong performance by Mondi
Packaging South Africa (MPSA).
However, the South African exportfocused
businesses continued to
suffer under the weight of a strong
South African rand and low product
prices.
Good progress was made with the
restructuring of Mondi’s cost base
and the implementation of additional
cost savings initiatives. The bold cost
savings target of E180 million was
exceeded, with E251 million of cost
savings being delivered. We exited
or mothballed around 930,000 tonnes
of high-cost paper capacity in just
over two years and closed or sold
18 converting sites.
Average return on capital employed,
a key measurement of Mondi’s
performance, was 7.6%. While this is
a disappointing outcome in relation
to the Group’s target of 13% across
the cycle, it nevertheless represents
a resilient performance given the
backdrop of an extremely difficult
business environment. Importantly,
we are confident that the actions
taken over the past year place the
business in a stronger competitive
position than it was when it entered
the downturn, allowing it to take full
advantage of any improvement in the
business cycle.
Furthermore, the focus on cash
flow optimisation was extremely
successful, with working capital
inflows for the year amounting to
E248 million and capital expenditure,
outside the two major projects,
reduced to 63% of depreciation.
As a result, net debt declined by
E173 million to E1,517 million,
despite capital expenditure of
around E300 million on the two
major expansion projects in
Poland and Russia.
Mondi enjoys a strong liquidity
position and, as at the end of
December 2009, the Group had
nearly E1 billion of undrawn
committed debt facilities, E0.8 billion
of which is available in terms of a
Group revenue of
E5,257 million
E1.55 billion facility which expires on
22 June 2012.
The Group proposed a final dividend
of 7.0 euro cents per share to give a
total dividend of 9.5 euro cents per
share for the year.
Delivering on our
strategy
The year under review has reinforced
the validity of our Group strategy.
Three pillars continue to underpin our
strategy:
• building leading market positions in
packaging and UFP, particularly in
high-growth emerging markets;
• delivering a high-quality, low-cost
asset base, through maintaining
our position as a low-cost producer
in our markets by selectively
investing in production capacity in
lower-cost regions and exploiting
the benefits of upstream
integration, including forestry; and
• focusing on performance,
especially continual productivity
improvement and cost reduction,
delivered through business
excellence programmes and
rigorous asset management.
Building leading market
positions
Our focus has been on achieving the
right product mix and geographical
focus, and by doing this we have
continued to increase the quality of
Directors’ report
Annual report and accounts 2009 Mondi Group 17